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By Darwin G. Amojelar, Reporter
THE World Bank on Tuesday cut its economic
growth forecast for the Philippines, citing higher consumer prices
and the US slowdown.
In its East Asia and Pacific Update, the
Washington-based lender downgraded its Philippine gross domestic
product (GDP) forecast to 5.9 percent this year from the 6.2 percent
estimate made last November.
The government targets GDP growth of between 6.3
percent and 7 percent this year. This is lower than the three-decade
high 7.3 percent expansion last year.
Vera Songwe, outgoing lead economist of the
World Bank for the Philippines, said the slow down would be due to
the international economic downturn, as well as higher oil and food
prices. “It’s not something that is internally driven,” she
told reporters.
For next year, the World Bank said the
Philippine economy is likely to grow 6.1 percent, below the low-end
of the government target of 6.4 percent to 7.1 percent.
“While the sub-prime crisis will have its
impact—possibly on some countries more than others—the more
immediate concern is that in virtually every East Asian country,
inflation is climbing to uncomfortable levels,” Jim Adams,
vice-president of the World Bank’s East Asia and Pacific region
said, adding real incomes of poor people have declined substantially
as a result of higher food prices.
The World Bank report noted that the real
challenge for governments in the region is addressing the
inflationary effect of mounting food and fuel prices especially
because of the harsh effects on the poor.
The lender expects the Philippine inflation rate
to grow 4.5 percent this year and 3 percent next year owing to
higher oil and food prices.
The government targets an inflation rate of 3
percent to 5 percent this year and between 2.5 percent and 4.5
percent next year.
“Rising food prices are exacerbating headline
inflation and hurting the incomes of the poor. These
developments could stall or even set back the progress made in
reducing poverty over the last decade while heightening political
tensions,” the report said.
Songwe said sustaining Philippine economic
expansion requires government raising its investment in
infrastructure.
“We don’t see investment picking up and this
is one of the things needed if you want to sustain your growth and
if you want to create a job,” she said.
“For you to have good growth and reduce
poverty very fast, you have to grow sustainably for at least 10
years. The Philippines is at the five-year mark. I think the
challenge is to decide, if we [want to] continue to go up or
stabilize or go down,” she added.
If the Philippines wants to lead the region, it
needs to attain an 8 percent to 10 percent growth, the economist
said.
Bert Hofman, World Bank country director for the
Philippines, said sustaining growth and making it more inclusive is
the challenge for government. “At last week’s Philippines
Development Forum, government and development partners discussed
what it takes to meet this challenge. These include measures such as
strengthening tax administration, expenditure management and
procurement processes, providing higher quality and quantity of
infrastructure and investing more in people, especially in basic
services for the poor,” he said.
The lender said that growth in developing East
Asia will decelerate to 8.5 percent this year.
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